There are a number of large UK enterprises operating in Vietnam, such as HSBC, Standard Chartered Bank, Prudential, and Dragon Capital. How would you assess Vietnam’s investment environment for UK enterprises?
The United Kingdom was one of the early investors in Vietnam, with notable groups being BP and Shell, followed by several professional service firms including Price Waterhouse, Ernst and Young, Grant Thornton, and KPMG. Banks and insurance followed, with HSBC and Standard Chartered Bank re-establishing their presence in the country as well as Prudential, which had their most successful business launch globally when they opened for business in Vietnam, and later Dragon Capital.
The investment environment has changed significantly over time since Doi Moi and the passing of the first Foreign Investment Law. The regulatory environment has strengthened significantly, which is to be applauded, but this has also led to many overlapping and often conflicting regulations.
Whilst there are often challenges in operating in Vietnam, British business is supported by a very strong G to G Strategic Partnership and the Joint Economic and Trade Committee, where issues can be raised and taken into account by law and policy makers. In addition, many UK companies are represented within the Vietnam Business Forum working groups and this year BritCham holds the Co-Chair role at the Forum.
Which sectors in Vietnam are attracting the most investment from UK enterprises?
In addition to traditional sectors, such as financial and professional services and insurance, education has long been of interest to UK companies, with British International School celebrating 25 years in Vietnam this year. Bilateral ties have been expanded and now take in pharmaceuticals, technology, digital transformation, climate change response, and green growth. I expect to see more investment from UK companies into renewable energy, particularly wind and solar, and a significant increase in financing through green bonds and loans, to help Vietnam on its journey to meet net-zero goals by 2050.
In 2021, agricultural trade value between Vietnam and the UK grew 71 per cent compared to 2020, a trend that continued in 2022, and I would expect that this creates interest on the part of British companies to look at investment opportunities in the sector, in particular in high-tech agriculture.
We will continue to see further investment in the pharmaceutical sector here, facilitated by the enabling provisions of the UKVFTA and potentially major investment into startups, particularly in fintech, logistics, and education. The investment will be further boosted by approval for the UK to join the CPTPP.
In 2022, the UK had a total of 53 investment projects in Vietnam with total registered capital of $64.33 million. What do you think about this result? What should Vietnam do to attract more investment from UK enterprises?
On the face of it, whilst the number of new investments in 2022 looks to be fairly significant at 53, the average capital per project looks quite small. However, the UK has become the third-largest European trading partner and the largest European investor in Vietnam. By the end of 2022, the UK had invested more than $5.5 billion in Vietnam and today there is keen interest in many sectors of the economy, including renewable energy, education, manufacturing, and logistics.
We also have to remember that a lot of UK investment comes in via third parties, such as Singapore, Hong Kong (China), and the British Virgin Islands, so the numbers recorded for the UK only tell part of the picture.
In addition, the UK is no longer regarded as a manufacturing nation and the country has transitioned, over many years, to service industries, and investments in service industries require much smaller amounts of capital.
With the signing of an agreement for the UK’s membership of the CPTPP and the expected ratification of that, one can expect a boost to investment but it not likely to be of the magnitude of major regional investors.
Vietnam is doing well in terms of investment promotion, with a very active Ambassador in London and a strong strategic partnership. High level bilateral visits continue to profile the relationship with Vietnam and this serves to attract UK companies to Vietnam by bringing to their attention the size of the potential market and access to the RCEP and the CPTPP. In addition, Vietnam needs to continue the process of improvements in the ease of doing business, the easing of restrictions on work permits and temporary resident cards (TRCs) and improving visa facilitation.
How will the UKVFTA promote bilateral trade between the two countries and the expansion of UK enterprises in Vietnam in the time to come?
The UKVFTA has had a significant impact on trade volumes between the two countries and also on investment. It came into effect at the end of March 2021 but with retroactive benefits starting from January 2021. This was one of the speediest negotiations of any FTA, in large part due to the strong strategic partnership established by the two governments.
Meanwhile, a strategic partnership between both sides has been in place for ten years and is stated as being at its strongest ever. Trade volumes increased 17 per cent in 2021, and total trade in goods and services (exports plus imports) between the UK and Vietnam was £6.4 billion ($8 billion) in the four quarters to the end of Q3 2022, an increase of 20.5 per cent, or £1.1 billion ($1.37 billion) from the four quarters to the end of Q3 2021.
Of this, total UK exports to Vietnam amounted to £950 million ($1.18 billion) in the period, an increase of 13.6 per cent, or £114 million ($142.46 million), compared to the same period the previous year.
Total British imports from Vietnam amounted to £5.4 billion ($6.75 billion), in current prices, an increase of 21.8 per cent, or £974 million ($1.21 billion) compared to the four quarters to the end of Q3 2021. Meanwhile, education cooperation, both through the 12,000 Vietnamese students studying in the UK and the growing number of schools and higher education institutions beating a path to Vietnam’s door, is a highlight for both countries.
What are the upcoming plans for BritCham to strengthen the investment of UK enterprises in Vietnam as well as the cooperation between businesses from the two countries?
This year of course marks the 50th anniversary of diplomatic relations between UK and Vietnam, so we will be working with the British Embassy and the Consulate General to organize events in celebration of this anniversary.
As mentioned, negotiations have been concluded on the UK’s entry into the CPTPP and as this gets more publicity I am sure more UK companies will look to take advantage of entry into the worlds’ largest trading bloc. BritCham is planning seminars to ensure a proper understanding of the benefits to UK companies of membership of the CPTPP.
BritCham will continue to work with our members in Vietnam to help with strengthening bilateral relationships and through our Co-Chair role at the Vietnam Business Forum, helping to ensure more active involvement of UK companies in the VBF. We will continue our program of business events and webinars, which also attract an audience from the UK, and working more closely with Vietnam UK Partnership.